Former treasury secretary Martin Parkinson has warned that Australia's living standards have started to fall and the country has a "once-in-a-generation" opportunity to pursue serious tax reform, which must touch all levels of government.

Dr Parkinson, who was recently hired as the secretary of the Department of Prime Minister and Cabinet, says he likes the leadership styles of British Prime Minister David Cameron, New Zealand Prime Minister John Key and NSW Premier Mike Baird because they treat the public like "adults" when explaining the need for tax reform.

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Malcolm Turnbull: Tax reform must be fair

Fairness is critical to the success of any tax reform, says Prime Minister Malcolm Turnbull during his first keynote economic address in Melbourne. Courtesy ABC News 24.

He says Malcolm Turnbull has a similar style to those leaders, and we have a good chance of getting serious tax reform in Australia with him as leader.

In a wide-ranging talk at the McKell Institute in Sydney, Dr Parkinson – who was sacked as treasury secretary by former prime minister Tony Abbott – said it was critical Australians understood why the need for tax reform was so crucial.

He said the Turnbull government had a genuine opportunity to realign federal and state tax relations to set the country up for sustainable economic growth, but all governments had to work together to achieve this.

He listed personal income and corporate tax rates, the ability for states to raise more of their own revenue, and the phenomenon of bracket creep as challenges that needed to be tackled by the Turnbull government.

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He said global forces bearing down on Australia's economy were putting great pressure on state and federal government budgets.

"[Bracket creep] is expected to push someone on average full-time earnings into the second-highest tax bracket from 2016-17," Dr Parkinson said.

"Over the decade ahead, the average tax rate paid by that individual is expected to rise from 23 per cent to 28 per cent ... that's a more than 20 per cent increase.

"If I stood up and said to you, 'My fellow citizens, overnight I'm going to increase your personal income tax burden by 20 per cent', you're unlikely to start to clap and cheer. But that's actually going to be the consequence of failing to act on [bracket creep]."

NSW Treasurer Gladys Berejiklian, who also spoke at the event, said the health of state budgets could be greatly improved if the hodge-podge of funding arrangements between the Commonwealth and states was cleaned up.

Dr Parkinson said he agreed, and he thought the GST ought to be broadened to cover more goods because there were too many items exempt and so the tax was less efficient than it could be.

He said state governments must think about ways in which they could raise more of their own revenue.

"We need to be mindful that raising taxes is not solely the responsibility of the Commonwealth … the structure of our federation reduces incentive for states to reform their own taxes, because the states don't raise the marginal dollar they spend [so] they have less reason to make their tax systems more efficient," he said.

"It's for this reason that the Federation White Paper needs to be closely aligned with the Tax White Paper. Real alignment and coherence … provides the Australian community with a once-in-a-generation opportunity to deliver substantive reform."

State and territory treasurers will meet on Thursday to discuss these tax reform, and state premiers will meet on Friday.